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Risk Exposures and Financial Spillovers in Tranquil and Crisis Times :, Bank-Level Evidence, Hélène Poirson, Jochen M. Schmittmann

Abstract
For a sample of 83 financial institutions during 2003–2011, this paper attempts to answer three questions: first, what is the evolution of banks’ stock price exposure to country-level and global risk factors as approximated by equity indices; second, which bank-specific characteristics explain these risk exposures; third, are there clusters of banks with equity price linkages beyond market risk factors. The paper finds a rise in sensitivities to both country and global risk factors in 2011, although on average to levels still below those of the subprime crisis. The average sensitivity to European risk, specifically, has been steadily rising since 2008. Banks that are reliant on wholesale funding, have weaker capital levels and low valuations, and higher exposures to crisis countries are found to be the most vulnerable to shocks. The analysis of bank-to-bank linkages suggests that any “globalization” of the euro area crisis is likely to be channelled through U.K. and U.S. banks, with little evidence of direct spillover effects to other regions
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. Related Literature; A. Bank Exposures to Common Shocks; B. Bank Exposures to Other Banks; III. Estimation Framework; A. Factor Specification; B. Estimated Bank Betas: Relation with Bank Characteristics; C. Bank to Bank Spillovers; IV. Data; V. Regression Results: Financial Linkages from 2003H1 to 2011H2; A. Global vs. Country Risk; Figures; Figure 1. World and Country Beta; Figure 2. What explains stock return variance?; Figure 3. Average World Beta: Germany, France, UK, US, and All
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (47 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484383377

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